Abstract

http://ssrn.com/abstract=2474346
 
 

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Public Pressure and Corporate Tax Behavior


Scott Dyreng


Duke University

Jeffrey L. Hoopes


University of North Carolina (UNC) at Chapel Hill

Jaron H. Wilde


University of Iowa - Henry B. Tippie College of Business

November 19, 2015

Fisher College of Business Working Paper No. 2014-02-003

Abstract:     
We use a shock to the public scrutiny of firm subsidiary locations to investigate whether that scrutiny leads to changes in firms’ disclosure and corporate tax avoidance behavior. ActionAid International, a non-profit activist group, levied public pressure on noncompliant U.K. firms in the FTSE 100 to comply with a rule requiring U.K. firms to disclose the location of all of their subsidiaries. We use this setting to examine whether the public pressure led scrutinized firms to increase their subsidiary disclosure, decrease tax avoidance, and reduce the use of subsidiaries in tax haven countries compared to other firms in the FTSE 100 not affected by the public pressure. The evidence suggests that the public scrutiny sufficiently changed the costs and benefits of tax avoidance such that tax expense increased for scrutinized firms. The results suggest that public pressure from outside activist groups can exert a significant influence on the behavior of large publicly-traded firms. Our findings extend prior research that has had little success documenting an empirical relation between public scrutiny of tax avoidance and firm behavior.

Number of Pages in PDF File: 52

Keywords: Public pressure, tax avoidance, reputation costs, disclosure, tax havens

JEL Classification: H25, H26, H20, G39


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Date posted: August 1, 2014 ; Last revised: November 24, 2015

Suggested Citation

Dyreng, Scott and Hoopes, Jeffrey L. and Wilde, Jaron H., Public Pressure and Corporate Tax Behavior (November 19, 2015). Fisher College of Business Working Paper No. 2014-02-003. Available at SSRN: http://ssrn.com/abstract=2474346 or http://dx.doi.org/10.2139/ssrn.2474346

Contact Information

Scott Dyreng (Contact Author)
Duke University ( email )
Box 90120, Fuqua School of Business
Durham, NC 27708-0120
United States
Jeffrey L. Hoopes
University of North Carolina (UNC) at Chapel Hill ( email )
CB #3265
Chapel Hill, NC NC 27599
United States
Jaron H. Wilde
University of Iowa - Henry B. Tippie College of Business ( email )
Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States
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